Welcome to 2023 and happy new year! Thanks for coming back and it is truly appreciated. As usual, we start the year with a range of predictions. We’ll talk through those this week, from what will happen to banking, fintech and cryptocurrencies. On first day however, let’s take a look at the general global and economic trends.
Maybe the best place to start is on a positive note and, even as the world faces many challenges, there are reasons to be hopeful about 2023 and beyond. Here are a few things The New York Times’ DealBook highlights as the most promising developments for this year.
We’re a little closer to a new source of clean energy. After a major breakthrough in nuclear fusion this month, investors are pouring money into companies that want to harness the type of energy that powers the sun and stars. Fusion, if it could be deployed on a large scale, would offer a nearly limitless pollution-free energy source. But until this year, scientists had never created a fusion reaction that produced more energy than it consumed. Scientists at Lawrence Livermore National Laboratory in California finally reached that milestone this month. While it could still be decades before fusion becomes a practical power source, the accomplishment is a big step toward that goal.
Real progress is being made in tackling child poverty. The number of children in America living below the poverty line has plummeted by 59 percent since 1993. As The Times’s Jason DeParle reported in September, “child poverty has fallen in every state, and it has fallen by about the same degree among children who are white, Black, Hispanic and Asian, living with one parent or two, and in native or immigrant households.” The improvements coincide with more generous state and federal subsidies for working families, and changes to welfare laws that make it easier for struggling households to apply for assistance programs.
Wall Street and venture capitalists are as bullish as ever on green tech. In his year-end letter, Bill Gates notes that climate-related R. & D. has grown nearly a third since the 2015 Paris accords. Private capital investment in the sector is on the upswing too, with $70 billion spent over the past two years. From that, new technologies to address climate issues are continuing to emerge. At the DealBook Summit in November, Larry Fink, C.E.O. of BlackRock, predicted that venture funding would flow more into start-ups using hard science to tackle the planet’s biggest problems. “I believe we will be seeing a transformation of where the money goes,” Fink said. “It’s not going to go to all this stuff that provided us good utility to get food quicker or find a taxi sooner.”
Bots probably won’t take your job — and could make it easier. Fears that technology will replace human workers are as old as technology, and they were raised once again in November when a company called OpenAI released ChatGPT, an automated writing program. But AI experts have long insisted that such technologies have limitations that prevent them from fully replacing humans. What the bots can do well is make grunt work easier. One example that went viral shortly after ChatGPT’s release: A Palm Beach doctor posted a video of himself dictating a letter to an insurance company.
We’re getting closer to cancer vaccines. Researchers have long thought that it was possible to immunize individuals at high risk of cancer, or even cure cancer in those who were already showing signs of it. Until recently, they had made little progress, but now promising results from preliminary studies are giving some doctors new hope. Moderna said this month that a skin cancer vaccine performed well in midstage trials. Moderna and others are working on dozens of other vaccines to treat various other cancers.
The argument for a four-day workweek is getting stronger. Not one of 33 companies that piloted a shortened workweek for six months as part of a large-scale study this year said they would return to a standard schedule. The firms, which together have more than 900 employees, also reported higher revenue and employee productivity. The nonprofit advocacy group that coordinated the pilot programs, called 4 Day Week Global, has signed up dozens of companies to participate in pilots next year.
From an economic perspective, Morgan Stanley reckon there’s some good news in 2023, with inflation peaking last year and things stabilising this year. However, they make clear there will be no growth and house prices will continue to fall, which is not great. Specifically, they state that we will “see weaker growth, less inflation and the end of rate hikes, with the U.S. narrowly missing a recession, Europe contracting and Asia offering green shoots for growth”.
Goldman Sachs agree with this view, and forecast that the US will avoid a recession, although stock markets are going to provide zero returns. Goldman Sachs Research analysts expect global growth of just 1.8% in 2023, which is pretty poor, whilst Europe is suffering badly due to the energy crisis created by the Russia-Ukraine conflict.
As can be seen, there's always a negative view. The Economist picked that one claiming that last year's issue was inflation but this year's will be unemployment.
"In America consumer prices are on track to have risen by about 7% in 2022, the highest in four decades. In Germany the rate will be closer to 10%, its first bout of double-digit inflation since 1951 ... in 2023 fears of inflation may give way to concerns about unemployment."
Then the International Monetary Fund (IMF) cheered me up by saying ‘the worst is yet to come’.
Unlike Goldman’s bear view, they are slightly more cheerful however, claiming that global growth will be up at a higher tick of 2.7%. Nevertheless, their report makes clear that we are in the worst state since the global financial crisis and the peak of the Covid-19 pandemic. Their report states that, “for many people, 2023 will feel like a recession,” and echoes warnings from the United Nations, the World Bank and many global CEOs.
Perhaps the most telling report of the year came from JPMorgan who state that: “most things that could have gone wrong for investors did in 2022. Markets that entered the year with extended valuations buckled in the face of elevated inflation, an aggressive global rate hiking cycle, war in Ukraine and economic challenges in China. Unusually, both stocks and bonds suffered big losses in 2022—one of the worst years ever for a balanced portfolio.”
They contradict some other forecasters by stating that America will be in recession in 2023.
“A monetary policy–induced recession in the United States seems more likely than not in 2023, while Europe appears likely to face a more difficult environment characterized by stagnant growth and elevated inflation. China’s path will be determined by policymakers’ commitment to zero COVID, while Latin America may be a relative bright spot.”
You can read the full report yourself here:
… and, for me, it is probably the one I would most agree with for 2023.
This year, like last, will be challenging. We are not in the good times. We are in the hard times. But then, as Charles Dickens said: “it was the best of times, it was the worst of times". By way of example, this year is also full of opportunities. As The Economist notes: India, the Middle East (West Asia) and emerging economies are all doing really well.
“The economies of the Gulf are booming, gaining not only from high energy prices but also their growing role as financial entrepots. India, which will overtake China to become the world’s most populous country in 2023, will be another bright spot, buoyed by discounted Russian oil, growing domestic investment and rising interest from foreigners keen to diversify their supply chains away from China. Broadly, emerging economies will fare relatively better than in previous episodes of rising interest rates and global recession.”
This year is full of opportunities. Every day starts with the ability to be better, do different things, create new ideas and potentially achieve everything you ever dreamed of.
“If we could change ourselves, the tendencies in the world would also change.” Mahatma Gandhi
Make the most of 2023. The economics may be gloomy, but everyone can make their dreams come true as long as you have dreams.
If you really want to know what's going to happen in 2023, check out these forecasts from the world's leading firms:
Andreessen Horowitz https://lnkd.in/ezJjAT5u
Apollo Global Management, Inc. https://lnkd.in/ewwq_62M
Arca Funds https://lnkd.in/eTF6K8ZP
Bank of America https://lnkd.in/e8XFD8TW
BNP Paribas https://lnkd.in/ec4hWEdm
BNY Mellon https://lnkd.in/ezMfVgND
Credit Suisse https://lnkd.in/e4CEK5NZ
DeFi Lama https://lnkd.in/eUZvdK2H
Delphi Digital https://lnkd.in/eHwjAtr2
Deutsche Bank https://lnkd.in/eAWCSV_7
Fidelity Investments https://lnkd.in/eJwK6tVx
Goldman Sachs https://lnkd.in/eKzF_2K4
Huobi Research https://lnkd.in/e6SbRqSa
J.P. Morgan https://lnkd.in/eHb6-622
Morgan Stanley https://lnkd.in/e2nAMjmM
New Order DAO https://lnkd.in/ef_9YqWF
Pantera Capital https://lnkd.in/eFYkcsNQ
Saxo Bank https://lnkd.in/e_TAY9kg
The Block https://lnkd.in/eSQQHvyd
Wells Fargo https://lnkd.in/euMkQnKE
Oh, and more to follow!
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...